3.6.3.1 Criterion 3–Loan to Value/Cost

A. A Section 241(a) supplemental loan is limited by statute to 90% of the HUD-estimated value of the improvements, additions, or equipment, regardless of the Section of the Act insuring the underlying first mortgage. The cost of the repairs and transaction costs (including the acquisition price of an adjacent or nearby land parcel) will be recognized as the value, as long as any additional land purchased or contributed is no more than the fair market value. Regardless of the Section of the Act of the underlying first mortgage, neither BSPRA nor SPRA may be recognized. The cost of the transaction can and should include builder’s profit (regardless of whether there is an Identity of interest.)